Executive Incentive Plan
Summary Plan Description
The purpose of the Executive Incentive Plan (the EIP or Plan) is to reward executives for thesuccessful long-term performance of USEC Inc. (the Company). The Plan provides a long-termincentive to officers of the Company to make continued commitments and contributions to USECsbusiness success through the use of awards that reflect the value of USECs stock over aperformance period. The Plan provides the Board and the CEO with the flexibility to establishspecific performance targets aimed at achieving the Companys significant mid and long term goals.The Plan is in addition to the Companys other time-based long-term incentive compensation (stockoptions and restricted stock) provided to executives. The EIP replaces the Companys previousthree-year Strategic Incentive Plan. The Plan arises under and is subject to the terms of the USECInc. 1999 Equity Incentive Plan, as amended (the Equity Incentive Plan). Where not otherwisedefined herein, capitalized terms within this summary shall have the same meaning as provided underthe Equity Incentive Plan.
The EIP generally provides for awards after the end of a three-year performance period in the formof (1) cash, (2) Shares of USEC stock that are immediately vested and freely transferable or (3)vested restricted stock units (RSUs). A participant election to receive his or her award in theform of RSUs must generally be made no later than six months prior to the end of the applicableperformance period, provided that no election will be permitted after the award has become bothsubstantially certain to be granted and payable in an amount that is readily ascertainable. Awardsin the form of cash or Shares of USEC stock will generally be granted within 2 1/2 months of the endof the applicable performance period.
Awards will be granted at the end of each performance period following the achievement ofpre-determined goals. The amount of the award will be equal to the predetermined target awardwhere performance during the performance period, when measured against predetermined performancegoals, is at target. Where performance meets predetermined goals that are established below(threshold) or above (maximum) target, the amount of the award granted will be between 80% and120% of the predetermined target award. Where performance does not meet threshold performance, noaward will be made. The maximum award under the EIP is 120% of the predetermined target award.
Eligibility for Participation The EIP will only include selected key corporate managementpositions nominated by the Chief Executive Officer and approved by the Compensation Committee atthe start of each performance period. Except under special circumstances, participation in thePlan will be limited to officers of the Company. A new employee that is eligible for participationwill not be allowed to participate in the EIP for a particular performance period unless thatemployee joins USEC no later than six months prior to the end of the performance period (e.g., nolater than June 30, 2008 for the performance period March 1, 2006 through December 31, 2008).
Performance Periods – The EIP provides awards based on Company performance over a three-yearperformance period. USEC intends to start a new three-year performance period every three years.The initial three-year performance period will be a shortened period and will begin March 1, 2006and will end December 31, 2008 (total of 34 months). The next three-year performance period wouldbe January 1, 2009 through December 31, 2011 (total of 36 months), and so on.
Target Awards A participants target award under the Plan for a performance period (the TargetAward) is equal to a specified number of Shares of USEC stock. The value of the Target Award fora participant in the Plan for each three-year performance period is determined as a percentage ofbase salary as in effect on the first day of the performance period. For the initial shortenedperformance period of 34 months, the target percentage will be calculated as if the performanceperiod were the full three years. The applicable target percentage of base salary varies by levelin the organization as follows:
|Value of the Target|
|Award (based on a|
|Annualized value of the||performance period,|
|Target Award||as a multiple of|
|Level / Title||(as a multiple of Base Salary)||Base Salary)|
President / CEO
Note that where an employee is not eligible for participation in the EIP for an entire performanceperiod and the employees award opportunity under the EIP is not otherwise forfeited, the value ofthe participants Target Award will be determined by multiplying the value of the Target Award(from the chart above, based on a three-year performance period) that would otherwise be applicableby a fraction, the numerator of which is the number of whole months the employee was a participantduring the performance period and the denominator of which is the total number of months in theapplicable performance period. The base salary used to determine the value of the participantsTarget Award will be the participants base salary in effect on the participants first day ofparticipation within the performance period.
The Target Award for a participant with respect to a performance period will be equal to the wholenumber result when the value of the participants Target Award is divided by the average closingprice for a Share of USEC stock on the New York Stock Exchange each trading day during the lastfull calendar month prior to the later of (1) the beginning of the applicable performance period(i.e., each trading day during February 2006 for the performance period March 1, 2006 throughDecember 31, 2008; each trading day during December 2008 for the performance period January 1, 2009through December 31, 2011; etc.) or (2) the date the participant first became a participant in theEIP.
If, due to special circumstances, an employee of USEC who is not at one of the levels set forthabove becomes eligible to participate in the Plan, the applicable target percentage of base salaryfor such individual will be determined by the Compensation Committee.
Performance Goals At the beginning of each performance period, the Compensation Committee shalldetermine, after consultation with and based on the recommendation of the CEO, the criticalfinancial and business performance goals with respect to which performance will be measured. Thegoals should reflect what needs to be accomplished in an applicable performance period to ensureachievement of the Companys mid and long term strategic objectives and to maximize shareholdervalue. The goals for each performance period may vary, but do not vary based on individualperformance. To the extent the Company wishes to satisfy the requirements of the exception to thegeneral deduction limit for compensation under Section 162(m) of the Internal Revenue Code of 1986,as amended (the Code) for certain performance based compensation that is provided under Section162(m) of the Code and applicable regulations and rulings thereunder, the performance goalsdescribed in this section with respect to a performance period will be established in writing bythe Compensation Committee from the goals approved by shareholders under the Equity Incentive Plannot later than 90 days after the commencement of the applicable performance period or, ifapplicable, not after 25% of the performance period has elapsed.
Performance Measurement The CEO will provide the Compensation Committee with periodic reports ofperformance during the performance period. Following the completion of each performance period,the CEO will review the achievement of the performance goals during that period and will rate theperformance. The Compensation Committee, at its first meeting following the completion of aperformance period, will then certify the performance results during that performance period andapprove or modify the CEOs recommendations.
Except where performance is less than threshold performance, the range of performance approved bythe Compensation Committee, and therefore, the value of the award with respect to each participant(the Approved Award Percentage), will be from a threshold minimum of 80% of the participantsTarget Award for threshold performance (as such level is predetermined) to a maximum of 120% of theparticipants Target Award for maximum performance at that predetermined level (target performancewould yield 100% of the Target Award). No award will be made for performance that is less thanthreshold performance. Actual awards will be granted only following the Compensation Committeescertification of performance results. The performance measurement approved by the CompensationCommittee will be applied to the Target Award for that performance period for each participant.As more fully described below, awards will be in the form of cash, vested and fully transferableShares of USEC stock or RSUs.
The Compensation Committee can exercise negative discretion concerning payout for any performanceperiod. While the threshold payment in the performance period is 80%, the Compensation Committeemay deem that a lower amount, including zero or no payment, is appropriate.
Timing of Payouts Grantees will receive awards as soon as practicable after the end of theapplicable performance period, but in no event later than 21/2 months after the end of the applicableperformance period. The first awards under the Plan will be granted in the beginning of 2009following the completion of the initial 2006-2008 performance period (assuming satisfaction of theperformance goals). After the first awards are granted in 2009, there will be subsequent grants(assuming satisfaction of the performance goals) every third year thereafter as each subsequentthree-year performance period concludes.
Form of Payouts Awards under the Plan with respect to a performance period are granted in one ofthree forms:
|1.||Cash (in an amount equal to the product of (i) the Fair Market Value of a Share(based on the closing sales price of the Companys common stock on the NYSE on the datepaid), (ii) the Approved Award Percentage and (iii) the Target Award);|
|2.||Shares of USEC common stock (with the number of such Shares equal to the product of(i) the Approved Award Percentage and (ii) the Target Award); or|
|3.||RSUs (with the number of such RSUs equal to the product of (i) the Approved AwardPercentage and (ii) the Target Award), ultimately settleable only in cash.|
For employees who elect to receive cash or Shares of USEC stock with respect to a performanceperiod, the election by a participant to receive cash or Shares will be made by the participant atthe time of the award.
For employees who elect to receive RSUs with respect to a performance period, the election by aparticipant to receive his or her award in the form of RSUs must be made no later than six monthsprior to the end of the applicable performance period (i.e., June 30, 2008 for the March 1, 2006through December 31, 2008 performance period), provided that no election will be permitted afterthe award has become both substantially certain to be granted and payable in an amount that isreadily ascertainable. Where no such deferral election is made timely, the participants awardwill be granted in the form of cash or Shares of USEC stock (as set forth above).
Treatment of RSUs RSUs awarded under the EIP will be subject to the terms of the applicable awardagreement, such terms will include the following:
|1.||Settlement: Settlement of the RSUs will be delayed until the date theparticipant incurs a separation from service as such term is defined for purposes ofCode Section 409A(a)(2)(A)(i) (a Separation from Service) or, if earlier, upon a Changein Control of the Company (the earlier of the date of the participants Separation fromService or the date of the Change in Control of the Company, the Settlement Date). Ingeneral, as soon as practicable following the Settlement Date, a participants RSUs willbe settled in the form of cash. However, in no event will amounts be paid to a specifiedemployee (as such term is defined in Treas. Reg. §1.409A-1(i)) before the date that issix months after the specified employees Separation from Service. The amount of cashpayable in settlement of a participants RSUs is equal to the product of (1) the FairMarket Value of a Share of USEC stock on the Settlement Date multiplied by (2) the numberof RSUs then held by the participant.|
|2.||Dividends: If the Company pays a dividend on Shares at any time between thedate RSUs are granted and the Settlement Date, the Company will grant an additional numberof RSUs (Dividend Equivalent RSUs) to each participant then holding RSUs in an amountequal to (1) the product of (i) the dividend per Share payable with respect to such Sharesand (ii) the number of RSUs then held by the participant, divided by (2) the Fair MarketValue of a Share on such date.|
|3.||Adjustment of Number of RSUs: The number of RSUs and Dividend EquivalentRSUs will be subject to adjustment as provided in Section 4(b) of the Equity IncentivePlan.|
|||Participants who leave the Company prior to the grant of an award with respect to aperformance period due to death, disability, involuntary Separation from Service by theCompany other than for Cause, or Retirement will receive an award valued and paid in theform of cash or Shares of USEC stock, at the election of the participant (or, ifapplicable, the participants beneficiary), at the end of the performance period. Thevalue will reflect pro-rata actual participation within the performance period.|
|||If the participant incurs a Separation from Service for any other reason (not set forthin the bullet above), including a Separation from Service after the end of a performanceperiod but prior to an award being granted for such performance period, all unvested awardopportunities will be forfeited. If the participant is terminated by the Company forCause, all award opportunities will be forfeited|
|whether or not vested, including any RSUs granted with respect to a performance period that hadnot yet been settled as of the date of resignation.|
|||To receive any award, the participant must have been a participant for at least six (6)full months during the performance period.|
|||Notwithstanding anything herein to the contrary, in the event of a Change in Control ofthe Company, the Compensation Committee will immediately grant and payout awards for thecurrent performance period such that the date of the Change in Control shall be deemed tobe the end of the performance period for purposes of calculating and granting awards forsuch performance period. Such awards shall be calculated assuming achievement of allapplicable performance goals at target level.|
|||Notwithstanding anything herein to the contrary, the Compensation Committee may amend,alter, suspend, discontinue or terminate the Plan or any portion thereof at any time,subject to the terms of the Equity Incentive Plan, and the Compensation Committee may amendor adjust awards under the Plan as provided in Section 15 of the Equity Incentive Plan.|